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AngelInvestment

An Angel Investor is an individual who invests their own money in a small business that wants to grow. They offer mentoring and support to business owners, as well as money.

“Anything can happen to a business along its journey. So, making money isn’t the primary motivation for Angels – or they just wouldn’t do it. It’s as much about being a part of the entrepreneurial journey and seeing the success of a business that you backed.”

Jenny ToothAngel Investor and CEO @ UKBAA

Killer Stat
Angels invest £1.5bn in UK businesses every year. That’s three times the amount invested by Venture Capitalists.

Key requirement

You need to be clear about how you’re going to grow your business

Key benefit

You will get a close relationship with an experienced mentor, who will champion your business in their networks

Key consideration

You need to make sure that you and your Angel have the same short and long-term goals for the business

What is Angel Investment?

Angels are High Net Worth Individuals who invest their own money into businesses in exchange for a minority stake (usually between 10-25%). They tend to be entrepreneurs themselves or have extensive experience in the business world.

Angel Investing is about more than just money. Businesses will also benefit from their Angel’s time, skills, contacts and business knowledge.

Angels get hands-on with a business. They will spend lots of time with the entrepreneur and help to push the business forward. It’s crucial that the Angel and the entrepreneur have a strong relationship, as they’ll typically spend at least five years working together closely.

Angel Investment regulations control the way businesses seek investment and make sure the investor is genuine and certified. Here are the two main regulations you should be aware of:

Under EIS, Angels cannot take more than a 30% share of a business, which makes sure that entrepreneurs stay in control and incentivised.

FSMAThe Financial Conduct Authority (FCA) regulates Angel Investing. The Financial Services and Markets Act 2000 (FSMA), states that Angels should self-certify as a High Net Worth or a Sophisticated Investor. This means that they are suitable to receive business plans and invest in businesses.

Who's involved with Angel Investment?

SyndicateAngels can invest alone, but usually they invest together as a ‘Syndicate’. This is when a number of Angels work together to pool their money and experience.

Lead AngelWhen a Syndicate invests in a business, the Lead Angel is the person who co-ordinates the investment deal. The Lead Angel will also have the most contact with the business after the deal. They can act as an adviser or even as a Non-Executive Director.

The Angel CoFund, a delivery partner of the British Business Bank, provides larger sums of money than Syndicates can usually afford.

“An Angel should be a trusted point of contact. They could be just a sounding board or even serve as a non-executive director. They’ll guide the entrepreneur and help steer the business towards growth and success.”

Considerations for Angel Investment

EquityYou're giving away a small share of your business, so make sure you understand the terms and are comfortable about what you're getting in return

Long-term pictureYou may need to ask for some more money later so it's important to be transparent about how many funding rounds you might need

EIS eligibilityIf you're looking at EIS tax breaks, make sure you are eligible before you speak to an Angel

TimeTracking down the right Angel or Angel Syndicate for you and your business can take time. Consider all of your options

How do you apply for Angel Investment?

Angel Investment doesn’t happen overnight, so prepare to network and do your research. Take time to prepare your pitch.

It usually takes about six months from your first approach to the Angel to get finance.

“At the start of the journey, when you are pitching for investment, the Angel doesn’t know you yet, so you have to captivate them and capture their interest to want to know more. Your story of why you set up this business is so important in your first approach to an Angel.”

Other finance options

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We are a UK government owned business development bank increasing the supply of finance available to growing smaller and medium sized businesses. The British Business Bank is not regulated or authorised by the Financial Conduct Authority (FCA) or the Prudential Regulation Authority (PRA).